AT&T To Spin Off Its Interest In WarnerMedia To Shareholders; Changes Expected Annual Dividend

(RTTNews) - AT&T, Inc. (T) said its board has decided to spin off the company's interest in WarnerMedia in connection with the transaction with Discovery, Inc (DISCA, DISCB, DISCK). Also, AT&T's board approved an expected post-close annual dividend of $1.11 per AT&T share, to account for the distribution of WarnerMedia to AT&T shareholders and to size the annual dividend payout at approximately 40% of projected free cash flow.

The company noted that the expected annual dividend per share is being changed from $2.08 to $1.11 to account for the distribution of WarnerMedia to AT&T shareholders and support the company's plans to step-up investment in its growth areas of 5G and fiber.

"In evaluating the form of distribution, we were guided by one objective - executing the transaction in the most seamless manner possible to support long-term value generation," said AT&T CEO John Stankey.

Under the terms of the previously announced transaction, AT&T will receive $43 billion in a combination of cash and other consideration, and AT&T's shareholders will receive stock representing approximately 71% of the new company, Warner Bros. Discovery, Inc. On the closing date, each AT&T shareholder will receive, on a tax-free basis, an estimated 0.24 shares of the new WBD common stock for each share of AT&T common stock held as of the record date for the pro rata distribution.

AT&T plans to use the estimated $43 billion in proceeds to deleverage and position the company as one of the best capitalized 5G and fiber broadband companies in the U.S.

Shares of AT&T were down 4% in pre-market trade on Tuesday.